11-month industrial production grows amid high business confidence

Vietnam’s 11-month industrial production remains optimistic since early this year thanks to the growing confidence of enterprises fueled by a more business-friendly climate in the country.

According to the General Statistics Office (GSO), in the first 11 months of the year, domestic industrial production increased 9.3% year-on-year, reflecting quite an optimistic climb, given the global uncertainties and domestic difficulties.

The year-on-year index of industrial production grew from 9% in the first quarter to 9.24% in the second quarter, and up to 10.29% in the third quarter. The rate was 10.6% for the first 11 months of the year.

“We see that industrial production in Vietnam is strongly increasing. For example, we see that demands for packaging in the Vietnamese packaging sector are growing strongly and we are seeking partners to apply our technology here,” said Antonio Grassotti, managing director of US-backed Ranpak Asia Pacific. “Ranpak’s paper-based packaging systems offer eco-friendly, cost-effective solutions and I think these solutions will soon be able to carve a firm niche in Vietnam.”

In the first 11 months, the packaging sector increased by 13% year-on-year, meaning great opportunities for firms and investors.

Grassotti was among more than 10 senior executives of big US firms who came to Vietnam a few weeks ago in order to explore investment opportunities. The businesses include ACORN International, Morgan Stanley, Nue Capital LLC, General Dynamics, Lockheed Martin International, BlackRock’s Asian Credit, Smart City Works, , Columbia University, Google, and USTelecom.

They highly appreciated Vietnam’s economic growth and fast-developing industrial sectors. They met with leaders of some ministries and a government leader, expressing their wish to do business and invest in Vietnam where some of them have earned profits successfully in many sectors.

Lockheed Martin, for example, produced Vietnam’s VINASAT-1 and VINASAT-2 communications satellites which have been operating in orbit for years.

According to the GSO, in the first 11 months of 2019, production of many industrial products witnessed strong year-on-year growth, such as steel (31.7%), metal ore exploitation (24.9%), refined oil products (24.6%), products from rubber and plastic (14.4%), paper and paper-based products (12.1%), furniture (11.4%), textile (11.3%), and drinks (10.9%).

Seok Gil Park, an economist at JPMorgan, said, “Strong industrial activity suggests Vietnam has benefitted somewhat from the relocation of manufacturing bases out of China, into emerging Asian countries. That said, the uncertainty on external demand lingers with US-China trade tensions, likely with a payback in the fourth quarter after a robust third quarter outcome.”

“Vietnam is an attractive low-cost base for manufacturing firms, including those looking to relocate from China due to the US-China trade spat, thanks to a cheap workforce and business-friendly government,” the document stated. “FocusEconomics Consensus Forecast participants estimate that industrial output will grow 8.7% in 2019, which is down 0.4 percentage points from last month’s forecast. For 2020, panelists expect industrial production to expand 8.8%.”

According to the Central Institute for Economic Management, the government is now placing its great priorities on supporting enterprises which are benefiting from an improved business climate and whose numbers have been strongly increasing.

Prime Minster Nguyen Xuan Phuc recently announced at the National Assembly (NA) that since early this year, Vietnam’s business climate has continued to improve significantly.

“It is expected that there will be 134,000 newly-established enterprises in Vietnam this year, and dozens of thousands of enterprises will resume operation,” he stated.

According to the GSO, the first 11 months of 2019 saw a record 126,700 enterprises newly established, with total registered capital of over VND1.574 quadrillion (US$68.4 billion), employing 1.13 million labourers. This was up 4.5% in the number of enterprises, up 27.5% in capital, and up 11.8% in the number of employees.

Last year, Vietnam saw 131,300 newly established enterprises with total registered capital of over VND1.478 quadrillion (US$64.26 billion), up 3.5% in the number of enterprises and up 14.1% in capital year-on-year.

“Never has the economy grown as strongly as it is doing today, and never have domestic businesses had a rise in their confidence as they do now,” PM Phuc said. “Many high-profile international organisations, countries, and partners are highly valuing Vietnam’s investment climate, and highlighting the country as a bright spot in the region and the wider world.”

The Asian Development Bank forecast that Vietnam’s economy will grow by 6.8% this year, while Standard Chartered Bank believed that the rate will be 6.9%, not only for 2019 but also for 2020 and 2021.

The NA has set an economic growth rate of about 6.8% for 2020.

Under assessments of the US News and World Report 2019, Vietnam has been ranked eighth among the best nations in the world to invest in in 2019, up 15 places as compared to 2018.